Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers)
Acquired · Jan 26TSMC founder Morris Chang
Chang bet ahead of demand: R&D fixed at 8% of revenue, capex tripled from about $2 to 2.5 billion to almost $6 billion in 2010 for 28nm. Its 20nm detour for Apple delayed 16nm, but customer trust brought most Apple volume back.
Tips
- Morris Chang fixed TSMC's R&D budget at 8% of revenue to end yearly fights▶ 41:30The fixed budget fed the push to 28nm, which Chang says propelled TSMC's effort from 2010.
- Morris Chang tripled capital spending in 2010 to go all in on 28nm▶ 44:05The result was good, because the smartphone era coincided with 28nm.
- Morris Chang overruled his independent directors on a threefold capex increase▶ 50:40The bet paid off as 28nm demand arrived with smartphones.
- Morris Chang refused to lay off staff by performance rating▶ 19:40Hundreds of laid off staff protested outside his home, and Chang took back the CEO job and offered to rehire anyone who wanted to return.
- Morris Chang took only half of Apple's capacity request and borrowed to fund it▶ 1:24:50Williams accepted, and TSMC still had to borrow billions of dollars even at half the demand.
- Morris Chang's 20nm detour for Apple delayed TSMC's 16nm and cost it first orders▶ 1:51:23TSMC's own 16nm came about half a year later and most of Apple's 16nm needs still went to TSMC.
- Morris Chang required customer deposits and said TSMC might confiscate them▶ 1:26:17TSMC never confiscated money, it let customers delay demand, and all of them eventually used up their deposits.
- Morris Chang refused IBM's 1999 offer to co-develop 130nm and kept TSMC's own process▶ 1:59:46UMC was already smaller than TSMC by 1999, and IBM's semiconductor business had been in trouble.
- Morris Chang built TSMC on the learning curve and never planned to stop at two fabs▶ 2:02:18Hosts Ben Gilbert and David Rosenthal note the semiconductor market grew from 26 billion dollars to 527 billion since TSMC's 1987 founding.
- Morris Chang saw fabless chip companies coming before TSMC had any▶ 2:16:30Hosts say TSMC's early customers were integrated chipmakers, which Chang knowingly accepted as a weak business to build capacity before the fabless wave.
- Morris Chang kept TSMC on a functional structure when others wanted divisions▶ 55:07The combined operations group covered roughly 10,000 advanced and 7,000 to 8,000 mainstream employees.
- Morris Chang let successor CEOs make their own mistakes unless the company was sinking▶ 57:51He took back the CEO job in 2009 after the layoffs and the 40nm dispute.
- Morris Chang built a real marketing arm and put an operations leader in charge to broaden him▶ 45:40C.C. Wei is now chairman and CEO of TSMC.
- Morris Chang planted a Goldman Sachs relationship years before he needed it▶ 1:21:12The board must approve share conversion to ADRs, which today trade at about a 20% premium to the ordinary shares.
- Morris Chang's new businesses in solar and LED proved a distraction from the core chip business▶ 26:15Hosts note that semiconductors became a 600 billion dollar market, far larger than the new businesses.
- Morris Chang held an off the record dinner with independent directors before each board meeting▶ 48:12It gave directors a place to question him before the formal meeting.
